IAG/Brexit: flight plight
Anglo-Spanish airline is coy about how it would avoid falling foul of EU ownership rules
Soothing words do little to calm anxious flyers. Nor will they be much help in dealing with a disorderly Brexit. Anglo-Spanish airlines group IAG has exuded confidence about its ability to navigate tricky ownership rules. But the latest signals from Brussels are not reassuring.
Airlines operating within the EU need to show at least half their shares are held and controlled by EU nationals. Only a fifth of IAG’s shares will be owned by these bestowers of grace, estimates broker Davy. IAG is coy about how it would avoid falling foul of the ownership rules. But it will try to rely on a convoluted structure that ensures voting rights are held locally — by the El Corte Inglés store owner in the case of Iberia, it emerged recently. Brussels may not be convinced.
A sense of proportion is necessary. Fears of big restrictions on flights into the EU or US will not be realised . The extra pressure on sterling resulting from a disorderly Brexit is probably more important than the ownership issue, although IAG is better hedged than some rivals. A lot of bad news is already in the share price. IAG shares are trading on less than six times next year’s earnings, near an all-time low.
IAG’s inscrutable calm contrasts with Ryanair’s longstanding warnings of “chaos”. If there is a hard Brexit, the low-cost rival plans to strip UK shareholders of voting rights. If they opt to sell, they will only be able to trade with Europeans. Brits, like other non-EU nationals, can buy US depositary receipts. Tellingly, their premium over ordinary shares has already risen steeply, up from 5 per cent to 30 per cent in the two years after the vote, says Citi. EasyJet has similar powers. It is already close to the threshold, with 47 per cent of shares in the hands of Europeans.
Most MPs want to avoid a disorderly Brexit. If they fail, shareholders must hope that IAG’s arrangements pass muster. Their confidence will not be helped by the lack of transparency. Expect more flight anxiety in the weeks to come.